Good day, everyone, and welcome to the Mack-Cali Realty Corporation Second Quarter 2013 Conference Call. As a reminder today's presentation is being recorded. At this time, I would like to turn the call over to the President and Chief Executive Officer, Mr. Mitchell Hersh. Please go ahead, sir.

Thank you, operator, and good morning everyone. And I thank you for joining Mack-Cali's second quarter 2013 earnings conference call. With me today is Barry Lefkowitz, Executive Vice President and Chief Financial Officer, and for his first earnings call appearance, Tony Krug, our Chief Accounting Officer. On a legal note, I must remind everyone that certain information discussed on this call may constitute forward-looking statements within the meaning of the federal securities law. Although we believe the estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. We refer you to our press release and annual and quarterly reports filed with the SEC for Risk Factors that could impact the company. First, I'd like to review some of our results and activities for the quarter and what we're seeing in our markets. Then, Barry will review our financial results, and Tony will be available to assist in any Q&A in the financial area. FFO for the second quarter of 2013 was $0.65 per diluted share. In that number it included some additional revenue, if you will, from some real estate refunds and some adjustments on fair market value liability. That was offset to some degree by our bond transaction done in May, and as you all know the higher than anticipated volume and rate sales and dispositions in the company. And so, with that, we adjusted our midpoint guidance, which you saw in today's press release to a range of $2.32 to $2.42. Our previous midrange guidance was at $2.45 at our last earnings call. Within the revenue composition, we had healthy leasing activity totaling over 1.3 million square feet of leased transactions that included in the second quarter 165 leased transactions. So, our leasing teams were working hard…

Okay. We had a technical problem. So, I will start over again. For the second quarter of 2013, net income available to common shareholders amounted to $23.1 million or $0.26 per diluted share as compared to $10.1 million or $0.11 per share for the same quarter last year. FFO for the quarter amounted to $65.2 million or $0.65 per share versus $62.1 million or $0.62 per share in 2012. Other income in the quarter included approximately $190,000 of lease termination fees as compared to $1.3 million for the same quarter last year. The results for period included $2.3 million or $0.02 per share in net real estate tax refunds as well as $1 million or $0.01 per share benefit from the mark-to-market of the Roseland contingent consideration. Last year, we had $2.5 million in expense in acquisition cost and $4.4 million in early extinguishment of debt cost. Same-store net operating income, which excludes lease termination fees, decreased by 1.6% on a GAAP basis and 2.7% on a cash basis for the second quarter. Our same-store portfolio for the quarter was 29.7 million square feet. Our unencumbered portfolio at quarter end totaled 237 properties aggregating 23.9 million square feet of space which represents about 80.3% of our portfolio. At June 30, we had total undepreciated book assets equaled $6.1 billion and our debt to undepreciated asset ratio was 38.8%. The company had interest coverage of 3.1 times and fixed charge coverage of 2.7 times for the second quarter of 2013. We ended the quarter at approximately $2.3 billion of debt which had weighted average rate of 5.64%. During the quarter, we issued $275 million of 3.15% 10-year notes which yielded the investors 3.41%. Last week, we extended our $600 million unsecured credit facility for a fresh four-year terms, and based on…

Thank you, Barry. So, in closing, I hope that you can see that we've continued to demonstrate our commitment to the transition of Mack-Cali from a future office and officeplex space provider landlord of choice in that arena to be equally a landlord of choice in the multifamily arena with our Roseland subsidiary. I've identified the fact that we do have a full pipeline in what we are undertaking right now at Roseland, continue to source new opportunities and at this time we are able to capitalize on those opportunities by self-funding through the disposition program that we've engaged in over the last year and a half or so, very successful in my view. And so, we're very excited to look at the future. In this transformation, we've moved pretty aggressively pretty quickly to accomplish it and we have a lot to look forward to in the future. So, with that, I will now ask the operator to setup the queue for Q&A. Operator?

Thank you. (Operator Instructions) And we will go first to Jordan Sadler with KeyBanc.

So if I can get a little bit of clarity on sort of what's keyed up and what's in guidance, you guys went through a few numbers in terms of new investment. I think I'm a little -- I'm more clear on the disposition side, the $410 million essentially Barry you just mentioned with 1.95 close to-date. I'm more sort of interested on the acquisitions that are sort of embedded in guidance. And then, outside of guidance what just overall you kind of -- those numbers, what they are again?

Well, embedded in guidance is the dilutive effect, if you will of the sales and disposition program that's been identified totaling a net of about $410 million, a gross of about $420 million. And so, that's all embedded in the current guidance that we provided this morning. In terms of what we have coming on stream, I think our filings have identified all of the development projects that that have currently broken ground and that will contribute to the income stream in the near term. As I mentioned on the call, under contract on one and about to enter in a contract on another asset, which total about $90 million between the two that would have an impact in 2014. So 2013 right now, is reflective of the income adjustments as a result of the sales that have closed and the Philadelphia sale that we expect to close eminently.

That $90 million, those are gross value that's inclusive of debt, that's not an equity number and that's your share at a 100%?

Our share is a 100%. The equity number is about $63 million. One of the acquisitions, which is a hard contract at this point, it was to our distinct advantage from a pricing perspective to assume it in existing mortgage to avoid a rather significant prepayment that the seller would have had to have provided, it's almost a brand new complex.

Are these along the water front in Jersey?

Are these along? One is on the water front and one is in a transit hub.

And what type of cap rates are we seeing on apartment acquisitions?

Six caps, okay. Can you -- and so, that's okay. So there's a little bit of delever. And those that $90 million is not obviously affecting this year's numbers in the model or in the guidance, so there is some delivering baked into the revision effectively to guidance. But can you may be give us a little more color on what you're seeing out there as it relates to the additional 200 of deals beyond this first 93 or 90?

Yeah, sure. Most of what we're engaged in right now are development opportunities. Development, which is, what I was say is a great deal of certainty in terms of entitlements and tax benefits and that sort of thing. And that's about all I can tell you other than there are in our major metro markets.

And so, and the cap rate should be in the same range, plus or minus?

Yeah, we anticipate cap rates in the range of 6% on a conservative basis.

And you dry powered today based on a pro forma basis is what?

We have cash on the balance sheet of about a $130 million. We have an uncapped $600 million facility.

And you have some incoming proceeds?

Correct. We have $201 million plus or minus coming in, in the near-term.

And the willingness to sort of utilize the line or to lever up a little bit, can you may be speak to that?

Well, we'll utilize to the line if need be. We've a long cash at this point. So we're going to deploy that first.

Right. That make sense.

Oh, sorry. In fact, the delivering as you've mentioned.

Right. But I mean is -- to these -- what the extent you close basically the first 90 and another 200 and you've got to deploy into the development, are you willing to sort of involve?

I will.

And then, my last question is just on the -- I'm looking at the apartments and I don't know in comparing this quarters supplemental versus last quarter's supplemental on page 15, on the unconsolidated joint venture breakdown. And I'm looking at occupancies and I'm not sure if these are the same numbers, but I see decline in overall occupancy on those seven properties from $93.50 million to $94 million now it's been a 140 basis point declines, pretty consistent across all the properties with exception of may be Monaco. Can you may be give is a little bit of insight there?

Its seasonal situation. That's all that's reflected there and in fact, we look at that as an opportunity. These are traditional seasonal low drops in the resi markets.

Okay. And do you know what type of increases you're seeing on renewals?

We expect 3% increases.

Our next question comes from Michael Bilerman with Citi.

Congrats on getting on all the sales done. Just questions on silly, just wanted to make sure I understood what was happening. So about $21 million of current NOI, you talked about $10 million to $11 million of CapEx as you've some vacancies coming, which I think I guess from your 4.5% comment you're effectively deducting the CapEx from the NOI and adding that to the base for the calculation. But what I'm trying to understand is, what is occupancies at 87, how much occupancy is going out, where does that $21 million of NOI go, for the fact that CapEx for a second, just so we can understand how that's trending?

Yeah. Well, we think that there is, at least from our perspective some wheel vacancy risk in a couple large tenants with near-term lease expirations one in '14 and above '14. And so, if we kind of look at the $10.50 million in order to maintain a trending NOI, if we were fortunate in finding absorption in those assets, we expect we would be spending about $10 million to $11 million on a recurring basis at least for the next few years to keep our current income stream, and as if we could find tenants to absorb that space.

And that's not dealing with any of the existing vacancy at all?

What's that?

That's not dealing with any of the existing, but portfolio is only 87% occupied today?

Correct, that's maintaining those tenant losses. And so, from our perspective on a cash flow basis, barring any unforeseen miracles, we would expect that it would be costing us $10 million or $11 million a year for the next two years.

Right. And I guess another way to look at it is, there is 25 basis points of yield just as occurring to the basis as effectively over course of three years, if we're able to maintain the 21 and the 230 gross, up $30 million in three years, you've a $260 million basis what a buyer does with $21 million of income at that point and then, it trends back to a normalize CapEx, thinking about more sort of an IRR, EPS approach basis?

Yeah. And if that happens then we would able to payoff bulk of our press and sharing 50% of the ups on either refinancing or sales.

And thinking about the long cash today and some of the opportunities on the apartment side. Can you talk also about the opportunity just in your stock, so when you had announced Roseland transaction, the board had setup a $115 million share repurchase program, last year you had executed $11 million at a price of $28 a share. Obviously, the stock today under 25, and had a hit of low of 23 in June. I guess, how do you think about the opportunity to buy your stock at an attractive price relative to being very aggressive in the transformation?

Well, I think that the part of the reason that the stock multiple has been so depressed is because of some degree of uncertainty with respect to a company that's in a transitional state. I have on the one hand moved quite aggressively and I think quite profitability in terms of disposing of our, what I will call well non-core or secondary market positions, so that we can fund this transition and create more certainty and reflect that to our stakeholders and our shareholders in both debt and equity that this transformation is working, that we have a full pipeline of opportunity, and that depending on how you view the math. What we're selling is supporting on an equivalent basis of what we're building or buying in the multifamily resi market. And so, I know that it is a quick fix sometimes to buy your stock back in terms of providing a benefit to your shareholders. The strategy that we have, however, was to demonstrate to the markets and to ourselves that our asset base and our skill set and our relationships in being able to consummate, fairly complex but yet profitable transactions by our seller transactions, could accelerate the transition takeout the uncertainty and fund the wealth of opportunities that we haven in the multifamily sector. And so, this is a medium to long-term strategy, and a directional change for the company. It certainly evolved as a result of the fact that the way companies use space and the amount of space that they use and the locations of where they use it in the office sector have gone through a pyridine shift and continue to do so and they continue to evolve. And so, that's a long way of saying that the funding mechanism was created to fund and build our platform and our strategic shift not to by our stock back, so that we could provide immediate benefits, this is a long-term gain.

But does the board -- and I assume with some advice from the management did setup a $150 million plan for a reason and did execute $11 million of that plant at 28 bucks a share. So did something change between then and now, especially with the stock considerably below those levels? What changed in the board or --?

What changed is that we got -- we entered into a structural change in the company with a great team and a great platform, and the platform that we acquired has been operating in complete synchronization and harmony with us at the core office, the corporate part of the company. And moving quite nicely, seamlessly, aggressively, and building that platform we didn't have that degree of certainty when the board initiated or approved the stock buyback plan. Now, we have much greater opportunities to deploy the capital to build that platform.

And then, just one other quick one the 6% on the acquisitions, is that a joint in yield or is that a stabilized yield?

We basically, present valued the stabilization period and reflected that in the price. We think we can stabilize the asset in about a year, so it's about 100 units or 100 apartments with some retail. And so, we discounted the lease up period, the stabilization period, and we reflected that in the purchase price. And the reason that the seller is doing this deal with us is because of a 40 year relationship with me and they have major holdings. And in today's kind of volatile and erratic environment particularly, in the debt markets and the interest rate environment et cetera, the seller wants to know that he has absolute certainty in the sale and so that's why he is doing that transaction with us.

So thinking about that both assets?

The other asset we're buying at approximately 6% and it is stabilized.

And that is interesting about the point that between those two; the development is how much of that $90 million gross?

They're equal in term of purchase price, but the one that stabilized comes with a mortgage that was some benefit plus total.

So each of them is $90 million or they different?

Each of them is roughly half of $90 million.

Half of $90 million okay. So as we think about redeployment of proceeds obviously like the $72 million that you've targeted for construction that say late 2014-'15 to when it impacts 45 and the 90 is a - -that will take -- that's probably going to go to 2015 NOI and then it sounds like the $200 million of potential which would cover all of the current cash and the expected proceeds is also likely for a new development. So, there will be just from a modeling perspective at the way the Street understands 2014 is going to reflect much more dilution until you get on the other side in 2015 where some of the reinvestments starts to pay dividends?

That's right. The opportunity set in the resi sector for us is the development sector and that's where we think -- with the what we're doing and what we hope to be able to do we can build into outsize returns. And so, there will be some period not being long on cash.

And from Green Street Advisors we'll go next to Michael Knott.

I'm sorry to make you clarify but it sounds like there was $200 million of potential opportunities that you're working on behind the 90 that you and Michael just went in through it on detail?

That's right.

And those would be more '14 closing as opposed to '13?

Well, notwithstanding the closings, they're development projects although we've modeled or targeted an acquisition target representing that $40 million but the rest are development opportunities that will be '15 income producers.

And then, can I ask you about Jersey City? Just curious if there's any update on the build-to-suit on that office side that you mentioned in prior quarters and then also just any update you care to share on the development project there Harborside?

Yeah. State of New Jersey in its infinite wisdom has been somewhat slow and I tell you I've been in constant communication with legislators. The entire incentive program in New Jersey under Grow New Jersey and the Economic Development Agency has reformed and remodeled the entire program, both in terms of grants under what's called the Urban Transit Tax Hub Credit which impacts our ability or impacts the timing with respect with respect to Harborside 7 which is our apartment transaction with Ironstate. We're ready; we're shovel-ready on that project. There is a significant tax benefit that we expect and have been identified to receive by the EDA of the State of New Jersey as soon as this legislation is passed. It wasn’t in a funding apparently in the last go round and they could only provide funding on a limited basis for two projects of need in any one municipality. That funding was done in March. So, we had to wait for this legislation which every senator and the assembly know and that Ironstate, our partner, knows committed to have it done by June 30. Well, now it's July 25, it's still not done. The governor is ready to sign it, he's stated publicly. That needs to be done. Now, that program that I'm referring to under EDA is a multifaceted program that affects what we call in New Jersey, the BEIP which is the Business Employment Incentive Program. The BRAG, which is the retention program that's all, being reformulated under this new legislation which will provide even more incentive, if you will, to employers to come to New Jersey and to domicile their workforce in New Jersey. And so, I hate to say it, but it's like the Federal Reserve. There's a lot kind of in limbo that's…

And then, I'm intrigued of the comment you gave earlier about a 6% cap rate on a stabilized property. Do you think that is a signal that cap rates have moved up for apartments or is that is something of a one-off deal?

Yeah, I think it's more of a one-off deal, what you still have assets trading in the city; you still have rent growth at least right now. You still have assets in the multifamily sector trading at 3.50, the 4.50. These are opportunities that we've in acquisitions because of a variety of factors, one-offs, like I said the certainty in one, fact that we're taking some lease up risk not a lot and in the other one again that certainty not only to the seller but to the seller's lender. And so, I think we're getting pretty good deals there.

And then, my last question basically about may be any preliminary thoughts on the outlook for 2014, things don't arrive, do you think it has a negative in front of it? Again, next year I know there's one big move out, sounds like conditions are stabilizing a little bit, just curious any thoughts you have on that question?

That it's a little premature Mike, we haven't analyzed that yet.

Our next question comes from Vin Chao with Deutsche Bank.

Just a follow-up on the cap rate question there, borrowings effectively that's sort of one-off deal, you mentioned financing cost on your last transaction, would be may be 80 basis points higher till today. Have you adjusted your sort of cap rate expectations in any way over the last couple of months?

Well, let me say this that interest rates have been somewhat volatile. But we've completed number one, the sales program and we're under contract in Philadelphia, but there hasn't been one re-trade, there won't be one re-trade on any of the sales, despite the fact that over that period of time there has been some volatility in the interest rate environment in the, as well as the vendors willing to assume some interest rate risk. So on the sales, we've seen certainty, we've seen clarity and conviction. On the buy side, if you will, the agencies in the multifamily space are still there. Some of the development projects that we're looking at right now have some unique tax incentive type financing aspects to them. So we don't expect much volatility. We saw a slight move frankly in our financing on Harborside 7, but we've locked in some spreads. With the lender it's a 15-year loan and some floors, to give both the lender and we some comfort that there won't be material adjustment to our pro forma as a result of the volatility. But naturally, if you see a inflationary spiral, and you're looking at asset classes not only in multifamily, but in every asset class, where if the cost of borrowing exceeds the cap rate you're beginning to have a problem, unless you can move rents to correspond and that's hard to do with long-term leases, it is easier to do in the multifamily space with 12 month leases.

And just on the suburban side and I'm assuming particularly there in the sales side of things, are you seeing any changes in that market in terms of number of other sellers coming to the market or are you seeing any increase in buying interest from may be a broader set of investors, just curious?

Yes and no, I mean it depends on the type of asset; the Sanofi Aventis long-term, highly rated investment grade rated credit. You've got fixed income investors, you got private REITs, pensions funds, and you can drive the pricing pretty good on that kind of an investment profile. There has been some increase because there have been fewer assets available at reasonable pricing levels or reasonable cap rates in the urban areas because of the whole concept of more protection, because of demographic shifts, urbanization et cetera, foreign investment coming in, wanting to be in the metro markets that are the gateway cities et cetera. So somewhat of necessity, there has been a little but a larger buying profile in the suburban markets but not materially different.

And our next question comes from Steve Sakwa with ISI Group.

Mitch, I just had one question. Early on you talked about kind of making some additional revenue or getting some additional revenue and some refunds and I don't think you actually quantified that figure. I just wanted to make sure we're properly adjusting going forward; could you give us that number?

Well, I think you -- in my first comment about FFO?

Yeah, I think that you sort of suggested that there may be some additional?

Yeah, we had from our prospective $0.03 an additional revenue in our FFO for the quarter. Part of that was $0.02 in real estate tax refunds, primarily in Westchester and then, about a penny in the earn-out reduction that Barry spoke up in the Roseland earn-out fair market value liability which we could go into more detail, but I think it's kind of like a complicated black shell type of model. So that represented $0.03 above our $0.62 consensus.

And from Cowen Group, we will go next to Jim Sullivan.

Well, I think that we certainly seeing things stabilize; we haven't seen the rents reverse direction at all. I can give you an example on a 100,000 square foot renewal with a tenant on a GAAP basis. We still had to write down this is a renewal during this quarter, this past quarter. We had to write down 13.5% on a cash basis, 20%, now that's somewhat extreme, but it's reflective of the fact that the tenants, even if they're in occupancy in the market in your portfolio still go out and hire brokers to kind of beat up on the landlord and meet the market, if you will. So, given our same-store and given what we really see in terms of the next two quarters we continue to think that the average NOI production or negative NOI for the year on a full year basis would be 4%. You recall that in our last earnings call for '12 we said 3% to 5%. And we're there, we're at midpoint.

And shifting focus to the new leases, Mitch, what percentage of those leases have fixed comps in them?

Well, virtually every lease that we do, let's say, offer a three-year lease has some degree of increase averaging anywhere from a 1.5% to 2% a year. And some of them are on a 10-year, that it will be a five and a five and its somewhat market specific in how you can do that, and the more urban areas we can raise rents annually but in the suburban markets that's not the custom and if it's a 7-year lease it will be the first four years at a number and then second three years or vice versa. That's how it works.

And may be if you could just help us because as we go forward as the residential segment of the portfolio expands, what are the plans, and I know this doesn’t begin until next year, but what are the plans in terms of reporting same-store NOI? It would obviously be very helpful if you segment that out. Is that the plan?

That is exactly the plan. We understand the community, if you will, the analytic community needs to see that and that's fully baked into our plan.

And then a final question from me. In terms of the G&A modeling, the second quarter run rate is that a good run rate to use going forward for the back half of the year or is there anything exceptional in that second quarter that comes up?

No, that's the perfect, that's the run rate as we anticipate.

And we do have a follow-up question from Michael Bilerman with Citi.

Yeah, just wanted to come back, just as we think about rest of the office portfolio for use Philly as the example where you talked about the heightened CapEx and the move outs. How should we think about the rest of your office portfolio in that light? Is it facing the same challenges in '14 and '15? If the Philly would -- as we think about you've been running $70 million, $80 million of total CapEx, and some of these comments about often you see hitting bottom. Do we extract what your comments are in Philadelphia to the rest of the portfolio?

No, I don't think so, Michael. The reason we're selling Philadelphia is because it was, what I would again say, a non-core secondary market for us. We don't have the competitive advantages in that marketplace to be -- and that's why I think in terms of the best interests of our shareholders will serve by doing this transaction where we could help a entrepreneurial operator build more market presence, for example, in Blue Bell he already owns a 0.5 million square foot, to capture more market share so that he can perform better on that portfolio than we could frankly and compete better with more market presence. And all the things that we do in our core markets he can do there. And the reason we're retaining 50% of the residual is so that we equally benefit down the road. But I don't expect that to ever impact us in our, what I'll call again, core markets, the Waterfront, Morris County, Northern New Jersey, Central New Jersey, Westchester, these are markets that we have very strong positions in and can do a lot better in terms of competitive set. So, that's my answer to your question.

Okay, and then in terms of potential future sales, I think you said in your opening comments that this would represent a cap at the present time.

I have no plans at this time to sell anything else.

And so, as you think about the sources and uses you've matched it up pretty well for what you have as cash and what's coming in versus uses that you outline in multifamily, what's going to be the decision factor after that's done, right? So, if you're successful at putting a $344 million of capital that you've identified and clearly --

Mike, I think, yeah, I get it. Look, part of the pressure on our stock has been the concern on the part of the investment community that we're going to issue equity to be able to fund our accelerated growth in the resi platform. With reasonable cushion we've now taken that uncertainty out of the marketplace. And so, that's my response. We have no imminent need to raise equity.

And we do have a follow-up question from Jim Sullivan with Cowen Group.

Mitch, one of the question here, you have a fairly sizable high coupon maturity in 2014 and I know that yield premiums, yield on these premiums can be very substantial, but I'm just curious what you can tell us about taking that financing or taking that debt and refinancing it, and how are you thinking about that today and kind of what's the timing? I don't know what the maturity quarter is 2014, but it's a near 7% rate on that. can you give us any update on the plans?

Yeah, okay, those are mortgages that you're referring to. It's not a --

Right.

Piece of debt. I mean, the maturity of that is a year from now. So, those are assets that we'll refinance or you extend those mortgages or renew them.

So there is no chance here that they would be prepaid?

They're locked out to prepayment up until 60 or 90 days prior to maturity

And Mr. Hersh, at this time there are no further questions. I'll turn the call back to you, sir.

Well, thank you very much. I hope that everyone participating today has found this to be an informative call. We always enjoy the opportunity of discussing what we're doing at the company with you. Exciting times for us in this transformation. And so, I want you to thank you for joining today's call and certainly look forward to reporting again next quarter. Have a good day and a great summer.

And once again ladies and gentlemen, that does conclude today’s presentation. We thank you for your participation.